Understanding Office Market Trend Evolution

Me and my colleagues were discussing something interesting this week. Companies are pushing return-to-office. But office vacancy rates are still near record highs. That’s when it hit us: 𝗧𝗵𝗲 𝗼𝗳𝗳𝗶𝗰𝗲 𝗶𝘀𝗻’𝘁 𝗱𝗶𝘀𝗮𝗽𝗽𝗲𝗮𝗿𝗶𝗻𝗴. 𝗜𝘁’𝘀 𝗯𝗲𝗶𝗻𝗴 𝗿𝗲𝗱𝗲𝗳𝗶𝗻𝗲𝗱. In the U.S., office vacancy across major markets has climbed to around ~21%, up from roughly 17% in 2020, even as companies encourage employees to come back. Workers now spend ~20% of working days at home, compared with about 5% before the pandemic, showing how hybrid work has structurally shifted attendance. So demand hasn’t fully recovered, even with return-to-office pushes. And the shift isn’t just about how much space is needed. It’s also about where. Downtown offices in many cities are seeing higher vacancies, while suburban locations and newer collaborative spaces are holding up better. Companies aren’t eliminating offices, they’re shrinking footprints, redesigning layouts, and prioritizing shared collaboration areas over individual desks. The data explains why. Globally, the pattern looks similar. Vacancy rates in many global business districts have crossed ~18%, the highest in more than a decade. Hybrid work is now identified as the primary driver of reduced demand. That’s a structural change. 📍Less daily attendance → fewer desks needed 📍More hybrid schedules → shared seating 📍Flexible work → reduced long-term demand Even office design is shifting. Average space per employee has already dropped from ~190 sq ft in 2000 to ~155 sq ft in 2023, reflecting hybrid work and denser layouts. And the ripple goes beyond real estate. 👉🏻 Higher vacancy affects downtown retail 👉🏻 Commute patterns change 👉🏻 Public transport demand shifts 👉🏻 City tax revenues come under pressure The office isn’t going away. But it’s no longer a default place where work happens every day. It’s becoming a collaboration hub, used selectively, not continuously. That’s the real shift. Not disappearance. Redefinition. #FutureOfWork #HybridWork #OfficeSpace #WorkplaceTrends #CommercialRealEstate #BusinessStrategy

The office market isn’t dead. But it’s not coming back the way most people think. What’s really happening? A massive flight to quality. Companies still want office space, but they want the best of the best. Let’s look at the data. 1. Leasing activity is surging in top-tier buildings. ↳San Francisco (+50%), Manhattan (+18%), Dallas (+11%). 2. Sublease supply is shrinking. (-3.8%) ↳A sign that companies are locking in premium spaces, not abandoning them. 3. Vacancy rates are breaking records in Class B and C properties. ↳While Class A towers remain fully leased. What does this tell us? Hybrid work is here to stay. But employees will only come in for: ✔️ Cutting-edge infrastructure (tech-enabled, sustainable, and flexible) ✔️ High-end amenities (think rooftop lounges, fitness centers, concierge services) ✔️ Collaboration-first layouts (goodbye, cubicles, hello, experience-driven workspaces) And the biggest losers in this shift? ❌ Investors betting on "business as usual" instead of adapting. ❌ Landlords clinging to outdated assets who can’t afford renovations. ❌ Companies stuck in second-rate spaces while competitors attract top talent. So, if you own or invest in office space, the message is clear. Premium is the only path forward. If you’re holding outdated assets, you’re already behind. If you’re investing in trophy buildings, you’re ahead of the curve. Because the office market isn’t dying. It’s evolving. Winners will double down on quality, experience, and innovation. Everyone else? They’ll be left behind.

The graph below, using StatsSA building stats, illustrates the multi-decade decline in prominence of South Africa's Office Market. The Office Market had its day as the "outperformer" of the major commercial property markets a few decades ago. But through the past 3 decades, its performance has been overshadowed first by retail property, and then more recently by industrial property too. And as the relative performances of the 3 major property classes have changed, due to demand-side changes, so the development sector has shifted its focus gradually, but very significantly, over the past 3.5 decades. Using a 5-year annual average for square metreage of building plans passed, one can see the relative "demise" of the office market, as the plan became for a smaller office market relative to the amount of overall property stock. From a 36.7% share of the total square metreage for the big 3 property classes in 1990, the office market's share of plans passed declined to a lowly 10.6% by the 5 years to 2024. So, while much has been made of the Covid-19 lockdown-related work-from-home (WFH) surge, the reality is that the office market had been running into demand-side challenges for many years prior.to Covid-19. As technology advanced, document storage space and storage facility requirements diminished sharply....constraining demand for space. Then there was the densification of desk space, a highly noticeable development in many corporates many years ago, helped on by the emergence of open plan offices. In addition, major economic sectors, such as the "Finance, Real Estate and Business Services" (FREBS) Sector, grew their output more through technology-driven productivity improvements than through employment growth, and a lack of employment growth meant a constraint on growth in desk space needs too. And then there was the emergence of greater levels of remote and hybrid work, which also started decades before Covid-19 lockdowns, as communications/information technology improved. There was also the emergence of hot-desking and "hotelling" of desk space. No permanently reserved desks for staff even when they are out of office and on leave means further curbing of desk space requirements. So it is important to understand that the office market's demand-side challenges were mounting a long time ago, and the sector has been gradually "right sizing" relative to the overall property market size for a few decades. But such right sizing is not a bad thing. It is a property class adapting to a new reality, where its prominence is diminished. When such adjustment is complete (with much existing surplus office space also still to be repurposed), there is no reason why a smaller (relative to total market size) office market can't one day outperform the rest in terms of total returns yet again. But that's probably still some years off, with a high national office vacancy rate still persisting. #office #wfh #realestate #southafrica #economy #property

The office market has flipped. For the past few years, landlords were chasing tenants. Now tenants are competing for quality space. Leasing volume hit a five-year high in 2024 and stayed strong into 2025. But new construction? Record lows. In Grand Rapids, vacancy held at 13.1% through year-end, but availability in premium Class A downtown space is much tighter than that headline number suggests. Zero new office projects in the pipeline. This creates a timing problem. If you need space now, your options are limited. If you have time but aren't planning ahead, you'll end up in the same position when your lease expires. What's making it worse: Office attendance is back up. Four days per week on average globally. The space you thought you could give back? You probably still need it. Companies are planning for growth. 64% expect headcount increases by 2030. Quality matters more than ever. Tenants want buildings that work, not buildings that exist. That shrinks the competitive set dramatically. Build-out costs are expensive. Move-in-ready space or lease renewals are becoming more attractive than custom construction. If you're evaluating space in the next 18 months: Get connected. Spaces that hit the open market are already competitive. You need to know what's coming before it's listed. Expand your parameters. Adjacent submarkets. Sublease opportunities. Buildings in transition. Flexibility finds options. Rethink your build. Modular furniture and lighter construction gets you operational faster and preserves capital. If you have a longer timeline, use it. Right-size with data. Explore emerging areas with better rent economics. Define your workplace strategy now and design for it, don't default to what you had before. Premium space is in short supply, and this is not temporary. The occupiers who secure the best space will be those who started planning early.

I recently had the opportunity to speak with Sumit Lakhani on The Corner Awfis podcast. We had an honest conversation about how much the commercial real estate space has changed over the last few years - and what those changes mean for developers, occupiers and employees alike. One of the biggest shifts we have seen is how companies now think more carefully about the kind of office spaces they want. There is a growing preference for high-quality buildings in multiple cities, and a clear focus on working with partners who can deliver long-term value. The market has become more selective, and that’s pushing everyone to raise their game. We also spoke about how tenant needs have evolved since the pandemic. Earlier, office design was mainly about fitting in more desks. Now, companies are looking for spaces that help people collaborate better, give them flexibility and make them want to come to the office. Many of our clients are redesigning their workplaces to include more open areas, creative corners, and layouts that feel less rigid and more human. There is also been a big focus on the overall experience we offer. Things like having more food and beverage options, clean and well-designed common areas, wellness zones, and better indoor air quality are no longer optional - they are expected. We did a survey with our clients to understand their top five priorities, and we have started making sure every project meets those needs. Sometimes, small things can make a big difference in how people feel at work. When I think about my 26 years in this industry, I believe the last few years have brought some of the most significant changes I have seen. The only other moment that felt this transformative was in the early 2000s, when India’s IT sector began its rise and brought in a new wave of office demand. What’s happening now may be even more meaningful, because it’s not just about demand - it’s about rethinking how offices function, what they stand for, and how they support the people who use them. A big thank you to Sumit and the team at Awfis Space Solutions Limited for hosting this conversation. It’s important to pause and reflect on how much has changed - and how much opportunity lies ahead.

The classic office use case is slowly dying. The traditional notion of the office as merely a place for routine tasks and clocking in hours is even 'deader'. In its place, a new role is emerging—an experience that redefines the workplace as a dynamic, engaging environment where every visit is purposeful and enriching. Hybrid work models are becoming the norm, blending remote and in-person collaboration. This shift demands a reimagining of workplace experiences to make every office visit meaningful and worth the commute. Employees now seek more than just a desk; they desire spaces that inspire, engage, and foster a sense of community. In response, many companies are attempting to right-size their offices—optimizing space to reflect new work patterns and reducing underutilized areas. This strategic downsizing allows organizations to reinvest in better workplace experiences, creating environments that attract employees back to the office by offering unique benefits not found at home. Corporate real estate is being disrupted by this evolution, moving beyond simply providing physical spaces to crafting vibrant, people-focused environments. The office is transforming into a hub of collaboration, innovation, and culture-building—offering experiences that fully remote work cannot replicate. This flight to experience is about creating workplaces that employees are excited to be a part of...sometimes. To make hybrid work truly work, companies must integrate flexible spaces, unparalleled services, and sustainable practices. Hospitality-led solutions—such as gourmet food options featuring locally sourced ingredients, artisanal coffee experiences, and orgnizational/community engagement events — elevate the workplace. Seamless meeting management ensures that every gathering is impactful, with state-of-the-art audio-visual support, tailored catering, and efficient logistics. By recognizing that the traditional office model is fading and embracing the flight to experience, organizations can enhance employee satisfaction, attract top talent, and drive success in an ever-evolving work landscape. Right-sizing offices and reinvesting in superior workplace experiences are key strategies in this transformation. The future office is not just a place to work; it's a place to connect, collaborate, and create—making hybrid work truly effective and every office visit valuable. #FutureOfWork

Did you know that tech and AI companies are now the largest drivers of office leasing activity in the U.S.? This revelation, highlighted in CBRE’s recent "Tech 30" report, signals a fascinating trend: even in a world where remote and hybrid work is becoming the norm, the demand for prime office spaces in key markets is surging—especially in cities like Austin and Seattle. Why? Because innovation thrives in collaborative environments, and tech companies know that physical proximity can amplify creativity and efficiency. As a passive investor, recognizing these types of trends can be a game-changer. Spotting where industries like tech and AI are making significant moves—whether through office leasing, hiring sprees, or infrastructure expansion—can give you a front-row seat to emerging growth markets. Here’s how you can identify these shifts before they dominate the headlines: 1️⃣ Follow industry reports like CBRE's "Tech 30" to track where companies are concentrating their efforts geographically. 2️⃣ Pay attention to job postings—companies expanding their workforce often drive ancillary growth in commercial real estate, housing, and local services. 3️⃣ Observe local development trends—new office leases often lead to broader investment in surrounding areas, from retail spaces to residential growth. Understanding these signals allows you to align your investment strategy with future growth hotspots. The office leasing uptick in the tech and AI sectors isn't just about workspace—it's a signal of where the next waves of innovation and opportunity will unfold. What other trends are you watching that could shape investment opportunities in 2024 and beyond?

The office market isn’t dead. It’s adapting - and faster than you think. We’ve heard it nonstop: 📉 “Office is over.” 🚪 “No one’s coming back.” 💻 “Remote killed demand.” But that narrative? It’s outdated. Here’s what’s really happening: 🔹 Flight to quality is real, Class A space is thriving. 🔹 Hybrid is pushing companies to reimagine, not abandon, space. 🔹 Urban submarkets with vibrant live-work-play ecosystems? Demand is up. 🔹 Employers are investing in space as a strategy, not just overhead. What we’re seeing isn’t collapse. It’s consolidation, repositioning, and prioritization. The strongest office assets are bouncing back, and in many cases, getting stronger. So here’s the question: Are you watching the headlines, or watching the data? Because the investors who are winning right now? They’re betting on smart locations, flexible design, and tenant-focused amenities, not just square footage. The office isn’t obsolete. It’s evolving. And the opportunity lies in that nuance.

The Expanded NCREIF Property Index shows office property values fell for the 13th straight quarter in 25Q2, exceeding the duration of declines during the GFC (8 quarters) and early 2000s (12 quarters). But the geographic breadth of this depreciation is shrinking. The number of markets with depreciation peaked at 53 in 23Q4 and has declined every quarter since then. In 25Q2 there were 34 markets in negative value growth territory, the lowest number in three years. The flip side of this analysis is that office values rose in 23 markets in 25Q2, up from just six markets in the same quarter a year ago, and the most since 29 markets had appreciation in 22Q2. Some office markets are beginning to find their footing, but very few are experiencing a clear positive trend. In the past four quarters, no markets have experienced four quarters of appreciation, and only eight have had three quarters of appreciation. However, there are 13 markets where office values rose in two of the past four quarters. The office sector’s recovery is likely to be slow and bumpy, with meaningful differences in performance across markets and subsectors. What factors are you seeing that drive these differences and how are you trying to identify markets and assets that will lead the sector in the years ahead?

📉 $2.9 Billion Wiped Out. Why Office Tenants Should Be Paying Attention. The Chicago office market is in the middle of the most significant reset we'll likely see in our lifetime. Many downtown office buildings have traded at 50% to 90% discounts from their previous sale prices, resulting in more than $2.9 billion in lost value across a sample of recent transactions. At first glance, those headlines sound alarming. But here's what companies need to understand: this is primarily a capital markets story, not a leasing collapse. Businesses still need office space. Employees still gravitate toward well-located, highly amenitized buildings. The biggest shift is that many owners are operating with dramatically different financial realities than they were just a few years ago. 💡 For tenants, that creates opportunity: • Increased leverage during lease negotiations • More generous tenant improvement allowances and concessions • Greater flexibility from landlords looking to attract and retain tenants • Access to premier buildings that may have been financially out of reach before That said, not every opportunity is created equal. 🏢 Who owns the building? Is there lender involvement? What's the long-term strategy for the asset? Those questions matter now more than ever, and understanding the financial position behind a building can create a real competitive advantage. This market isn't disappearing. It's resetting. If your lease expires in the next three years, now is the time to evaluate your options and build a strategy that takes advantage of one of the most favorable negotiating environments we've seen in decades. Bespoke Commercial Real Estate Tyler Biggs #ChicagoCRE #OfficeMarket #CommercialRealEstate #TenantRepresentation #Chicago #LeasingStrategy